Facts:
Abra Valley College, Inc., represented by Pedro V. Borgonia, initiated a legal action to nullify the “Notice of Seizure” and “Notice of Sale” issued against its property for non-payment of real estate taxes totaling P5,140.31. The college’s property in Bangued, Abra, covered by Original Certificate of Title No. Q-83, was subjected to tax delinquency measures by the respondents, Municipal Treasurer and Provincial Treasurer of Abra. On July 6, 1972, a “Notice of Seizure” was issued, and on July 8, 1972, the college property was sold at public auction where Dr. Paterno Millare, then the Municipal Mayor, made the highest bid of P6,000.00, resulting in a Certificate of Sale issued to him.
A series of pleadings ensued, starting with Millare’s motion to dismiss, followed by an Answer and an Amended Answer by the Treasurer respondents. The case proceeded to trial, where on October 12, 1972, the trial court ordered the auction proceeds to be delivered to the Clerk of Court. Subsequently, the petitioner deposited P6,000.00 with the trial court.
The parties entered into a stipulation of facts, acknowledging the ownership of the property by the college and the public auction sale. The only contentious issue was whether the property was used exclusively for educational purposes.
The trial court ruled against the college, emphasizing the residence of the Director on the second floor of the school building as contrary to exclusive educational use, and therefore the property was subject to taxation.
Procedurally, the case reached the Supreme Court through a petition for review on certiorari, contending essentially that the court a quo erred in its findings and decisions, primarily focusing on the interpretation of “exclusive” use for educational purposes per the 1935 Philippine Constitution and Commonwealth Act No. 470.
Issues:
1. Whether the phrase “used exclusively for educational purposes” includes the incidental use of a school building’s floor for residential purposes.
2. Whether the lower court erred in confirming the validity of the seizure and sale of the college’s lot and building for non-payment of taxes.
3. Whether the petitioner is exempt from paying real property taxes based on the purpose of use.
4. Whether the confiscation of P6,000.00 by the college for taxes and redemption of the property is proper.
Court’s Decision:
The Supreme Court affirmed the decision of the Court of First Instance of Abra, Branch I, but modified that half of the assessed tax be returned to the petitioner. The Court agreed that the property does not qualify for full tax exemption for being used exclusively for educational purposes due to the commercial use of the ground floor of the building. The Court’s analysis included the evaluation of the property’s use and followed the precedent that the use of a property for the purposes mentioned in the Constitution should determine its tax exemption status, considering incidental use thereof.
Doctrine:
The legal doctrine established in this case hinges on the interpretation of “used exclusively for educational purposes,” as stipulated in the 1935 Philippine Constitution. The Supreme Court clarified that this exemption extends to facilities incidental to and reasonably necessary for educational purposes. However, when part of the property is used for commercial purposes, the exemption becomes partial, proportional to the use.
Class Notes:
– Tax exemptions under the 1935 Philippine Constitution apply to properties used exclusively for religious, charitable, or educational purposes.
– Incidental use is considered in determining exclusive use for tax exemption.
– Incidental residential use by directors or school staff does not disqualify a property from being “used exclusively for educational purposes.”
– Commercial use of any part of the property negates complete tax exemption, leading to potential partial exemption based on actual use.
Historical Background:
The case took place in the context of a changing legal landscape where the definition and scope of tax exemptions for educational institutions were undergoing scrutiny. It occurred during a period when courts were tasked to interpret constitutional provisions on tax matters precisely and when private educational institutions’ role in society was increasingly significant, thus prompting legal clarifications on their tax liabilities.
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